Energy

Forty Years of Energy Policy

June 29, 2016  • Greg Gershuny & David Monsma

Forty years ago, in August 1977, more than three dozen distinguished policy makers and other experts gathered in Aspen, Colorado to discuss the state of energy and what the United States could do to overcome the severe challenges it was facing. In the aftermath of the oil crisis, they focused on the threat of further disruptions in oil supplies from the Persian Gulf, the increasing cost of building power generation, the potential of an unbalanced market where demand severely outstripped supply, and the inevitable peaking of world oil production that would lead to ever increasing energy prices. The outlook was bleak and the report from this first forum concluded, “We view the energy issue as one of the crucial tests of the ability of governments and our other institutions to assure social progress and protect individual freedoms.”

From a comfortable seat here in 2016, oil scarcity is not a topic on the agenda at any of our forums this year.  Although the Saudi Oil Minister recently declared the oil glut over, the market is still well supplied, with plentiful supply and weak demand suppressing oil prices for over two years.  Storage of oil is near record high levels because of a contango market.  Furthermore, the shale revolution in the US has added more than 3.5 million barrels per day of oil to the world market over the past ten years.  Plus, Russia and Saudi Arabia are also pumping oil at higher levels, and resurgent producers like Iraq, Iran, and Libya are making up for lost time by pumping more. Thus, unlike in 1977, oil supply isn’t the only issue being discussed in our forums.

The 40th Anniversary Energy Policy Forum (EPF)will examine domestic power generation, grid security and resilience, and low-carbon technology development.  In 1978, just a year after the first EPF warned of diminishing oil and natural gas supply, Congress passed the Fuel Use Act which banned the use of natural gas as a fuel in new power plants and industrial boilers and limited its use elsewhere.  This new law, which was to conserve natural gas and oil, led to the doubling of coal-fired power plant capacity in the US over the next 20 years. Nuclear power capacity was also on the rise in the late 1970’s.

Today, utilities are dealing with increasing retirements of coal and nuclear plants, for both market and regulatory reasons.  Utilities and independent generators are replacing the lost capacity with cheap natural gas and increased renewable generation, yet issues remain around reliability, pricing, disintermediation, business models, and infrastructure funding.  New challenges also exist in the areas of security and resilience; physical and cyber-attacks as well as increased occurrence of extreme weather caused by anthropomorphic climate change.

The Global Energy, Economy, and Security Forum grew out of the Energy Policy Forum in 2005.  Created to look more closely at oil and gas markets internationally, it has evolved to include topics such as regional geopolitical issues in areas like the Middle East, Russia, Latin America, and China, while also examining global supply and demand dynamics in oil and gas markets.  This year it will also feature an examination of the role of fossil fuels in a carbon constrained world.  Other topics ranging from the possibility of a US carbon price to methane reduction policies,  the use of lower carbon intensive fuels and the technologies that will help the US and the world transition to lower carbon options in the electricity and transportation sectors. Whereas in the 1977 Forum, oil security was the primary concern, today the topic of energy security and stability encompasses far broader policy, economic and technological factors.

The Clean Energy Innovation Forum, another recent offshoot from the original Energy Policy Forum, is designed to look at the cutting edge of energy technology, policy, and markets.  In 1979, when President Carter put the first solar panels on the White House, the cost of solar was measured in dollars per watt – today both onshore wind and utility scale solar are measured in pennies per watt. Though the internal combustion engine is still with us, the market for electric and hybrid gas-electric vehicles has been steadily increasing.  Energy storage innovation for backup and balancing intermittency, and data about the use and price of energy are evolving at an ever increasing pace, and utilities are developing plans to address how to meet the requirements of new regulations and respond to the increasing presence of distributed generation.

Finally, the inaugural Future of Nuclear Energy Forum, is shaping up to be an important discussion at a key point in time for both nuclear energy as an industry in the US and for climate change in a post-Paris world. When a steep reduction in carbon emissions is necessary and domestic penetration of non-hydro renewable technologies is still only 7% of total generation, it would be unwise to overlook an energy source that currently contributes 20% of total electricity in the US, and 60% of its no-carbon generation.  Existing nuclear plants are facing regulatory and market barriers to staying open, as demonstrated by several recent announcements of plant closures in New England, Illinois, and California.  While investment in advanced and small modular reactor research and development is increasing, there are many regulatory, financial, policy, and market obstacles they face before they can make a contribution to the domestic clean energy landscape.

For forty years, the Aspen Institute has been a unique place where thought leaders in energy, economics environment, and innovation have come together as a community to discuss these important topics.  While many of the issues and concerns have changed over that time, some of overarching challenges remain.  Energy remains the foundation of the global economy and an important component of international security.  In fact, we are more dependent on energy now than ever before, and if we are to each make a contribution to the good society, we must continue to examine this important topic.  The participants at the forums have changed, but the challenges we face remain just as urgent and important, if not more so today as they were forty years ago.